Defined benefit pension transfers

Supervising defined benefit (DB) transfers has been a key priority for us since the pension reforms, commonly known as the ‘pension freedoms’, were introduced in 2015. We summarise our work to date and how we continue to supervise this area. We also clarify the change in permission resulting from changes to the glossary definition of pension transfer.

Defined benefit pension schemes provide members with a guaranteed income in retirement, which we consider important and valuable benefits for members of these schemes. Advice on whether to transfer a DB pension is complex and requires specialist resources. Since the 2015 pension freedoms, advice in this area has been mandatory for any transfer with a value over £30,000.

Supervising DB transfers

We published updates on our work in 2017 and 2018, and June 2020 have conducted specific work into advice provided to members of the British Steel Pension Scheme.

Our supervisory work has also been supported by updates to our rules and guidance including PS18/6 and PS18/20 and PS18/20 our draft guidance on advising pension transfers.

We have taken significant action against firms who have not met the standards of advice and behaviour expected for financial advice. Where we suspected serious misconduct we have opened enforcement investigations. 

Focusing on the most active firms

The DB transfer market is significant in terms of both the number of people and monetary values involved. In 2018, we issued a data request to all firms with pension transfer advice permissions. Our high-level findings are published in our market-wide data results reviewing DB pension transfers. This data enabled us to build a more comprehensive picture of the pension transfer advice market: advice was provided on £82.8bn of transfers, with 162,047 members being recommended to transfer their pension.

This data gives us the information we need to focus our continuing supervision of firms and drive up the quality of advice.  By focusing on firms where the risk of poor practice is highest, we can prevent consumer harm in future. We can do this by working with the firm, or stopping it carrying out activities until our concerns are resolved.  It may also involve more formal action if that is required.

We are also working to improve understanding of the DB pension transfer market. This will include working with firms, market-wide campaigns, and industry seminars and meetings with key people and organisations.

Our rules and guidance provide a framework through which suitable advice can be given, however we will not hesitate to take action where firms have not heeded our messages and are presenting harm to consumers.

Change in pension transfer permissions

The Handbook definition of pension transfer has changed and from 1 October 2020 refers to transfers of safeguarded benefits to flexible benefits in a different scheme, plus some transfers of safeguarded benefits to other safeguarded benefits. As a result, the regulated activity of advising on pension transfers and opt-outs now covers only transfers of this type. 

The non-standard limitation has changed to reflect this and firms should use this revised wording:

  • short description: limited pension transfer activity
  • long description: This activity is limited to the provision of advice on the conversion or transfer of benefits from pension policies with a guaranteed annuity rate

Regulated advice under FSMA on transfers from defined contribution occupational schemes without safeguarded benefits is now covered by the activity of advising on investments (except on pension transfers and opt-outs).

See PS20/6 and the Handbook glossary for definitions of pension transfer and guaranteed annuity rate.

Page updates

02/11/2020: Information added Change in pension transfer permissions added